Contractor Suffolk’s Hospital Project Is on Critical List After Steward Health Care Bankruptcy

Before it was hit by troubles that now threaten to kill it, a new hospital being built by Suffolk Construction in Norwood, Mass., was shaping up as a tale of recovery.

The existing hospital on the site had been forced to shut most local operations since a devastating rainfall and flood in 2020.

Hospital President Salvatore Perla, who in April 2023 stood before a landscape of soil, concrete foundations and steel delivery trucks to videotape a cheerful progress report on the replacement building project, acknowledged that everyone in Norwood “is super-anxious about the schedule.” 

But after Suffolk Construction and its subcontractors had framed the new building last January, another tragedy struck when the hospital owner, Dallas-based Steward Health Care, stopped paying for the work and in May filed for bankruptcy protection.

Medical Properties Trust, an Alabama-based real estate investment trust that owns hospital buildings leased by Steward, took over the hospital’s architecture and construction management contracts and started paying for work to continue.

But after the Massachusetts Dept. of Health declined to extend a deadline for the new hospital operating license requested by the trust, it expired last month.

The project remains in legal limbo with the trust now suing the department in state court in Boston over the license issue. The trust seeks an injunction preventing the state from withholding the license to operate, saying the decision was arbitrary and harmful with its large project investment. 

Suffolk Construction has a four-person crew completing winterization and conditioning, says a spokesman. “We will most likely be pulling off the job in the next few months, April at the latest,” he says.

In its lawsuit against Massachusetts, the trust alleges that its property insurer had paid only $36 million of a claim for $200 million. The dispute centers on the insurer’s contention, in a separate federal court lawsuit in Boston, that the policy payout cannot exceed a $100-million sublimit for flood damage, says the trust.

The court timetable to resolve the dispute remains uncertain, the trust also states, noting that it “is reliant on these insurance payments to help cover the cost of construction and advance the project.”

Steward originally estimated cost of the new hospital building in 2021 at $325.7 million, but costs have gone up, the trust alleges.

Another Steward construction project, the Wadley Regional Medical Campus, in Texarkana, Texas., has faired better than its Boston area peer. 

Prime contractor Robins & Morton halted project work on the new facility for several weeks earlier this year after Steward stopped paying for it. But the trust also took over that project and in September, CHRISTUS Ark-La-Tex, another hospital chain, bought the medical facility and is operating it.